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Indian Bank reported weak performance in the September quarter with a fall in profitability and worsening asset quality. This indicates that the public sector lender has hit a challenging phase after reporting performance that was better than its peers till a couple of quarters ago.
The Chennai-headquartered bank’s net profit fell 67 per cent at ₹150 crore for the quarter ended September 30, 2018, compared to ₹452 crore in the previous-year quarter.
Higher provisioning for bad debts, mark-to-market losses, and significantly lower profit on sale of investments were the key reasons for the drop in net profit, said Padmaja Chunduru, Managing Director & CEO.
Net interest income of the bank grew 12 per cent to ₹1,731 crore (₹1,544 crore in Q2 of the previous fiscal).
Operating profit
Other income was lower at ₹428 crore (₹714 crore). In the year-ago quarter, the bank had a profit on sale of investment of ₹262 crore, which boosted other income. But in Q2 this year, it was just ₹5 crore.
Hence, its operating profit was lower at ₹1,191 crore (₹1,376 crore).
With higher slippages of ₹1,624 crore (against ₹310 crore in Q2 of the previous fiscal and ₹1,038 crore in Q1 of this fiscal) mainly due to infrastructure accounts that were under the watchlist, its gross NPA increased to 7.16 per cent from 6.67 per cent in the year-ago quarter, but was down from 7.20 per cent this June quarter.
Net NPAs also increased to 4.23 per cent from 3.41 per cent in the year-ago quarter and 3.79 per cent in the preceding quarter. Total provisions were higher at ₹1,041 crore (₹924 crore). Total advances grew 20 per cent at ₹172,322 crore (₹144,206 crore).
Of this, domestic advances rose 20 per cent at ₹165,138 crore (₹1,27,750 crore), driven primarily by RAM (retail, agriculture and MSME), which posted a growth of 25 per cent at ₹96,902 crore, or 59 per cent of the gross advances.
Chunduru expressed confidence that the bank would bounce back with better numbers in the next two quarters, with sharper focus on recoveries and containing slippages.
The bank expects to recover about ₹850 crore over the next two quarters out of NCLT accounts that are in insolvency mode.
Exposure to IL&FS Group
To a question, she said the bank’s exposure to the troubled IL&FS Group was ₹1,809 crore through 10 accounts, of which, two have turned NPA, with two more under the watchlist.
Referring to the liquidity issues in non-banking finance companies, she said the bank had no issues with NBFCs, and the quality of that portfolio remains healthy.
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